It doesn’t make sense, but our government has created this crazy game: Instead of simply paying a fixed amount per procedure, Medicare pays hospitals many times more than out-of-hospital surgery centers and clinics.
As a result, doctors began selling their practices to hospitals to boost hospital profits, which allowed the hospitals to swallow up more competitors, like a lick-your-own ice cream cone creating a monopoly and driving up prices.
This two-tiered payment system is a prime example of how today’s health care industry is exploiting government policies to extract millions of dollars from ordinary Americans.
Consider the plight of Kyung-hee Lee. For years, the retired Ohio dry-cleaner had been getting $30 injections every year to relieve her arthritis. But her bill increased more than tenfold when her doctor’s office moved up one floor, NPR reports. That’s because one of Ohio’s largest hospital systems bought her doctor’s practice, and her regular shots came with a $1,262 facility fee. Medicare paid most of the $1,394 bill, but Lee paid $354.
Frustrating, right? But it’s entirely solvable. In December, the House of Representatives passed a bill that would require “location-neutral” payment for infusions. But the Senate, faced with opposition from the powerful hospital lobby, has not taken up the measure.
Hospitals argue that they should pay more because their costs, including caring for the uninsured and providing 24/7 access, are higher than those of non-hospital-owned facilities. But there are plenty of reasons to question this logic.
For example, most large nonprofit hospitals receive millions of dollars through the government’s 340B drug program, which is designed to reduce drug costs for low-income patients. Hospitals also receive large bonuses from Medicare for training residents (even though residents are cheap labor and save hospitals money). In addition, both Medicare and Medicaid pay hospitals directly for uninsured patients, with additional bonuses for rural and critical access hospitals. Hospitals are also flooded with charitable donations that don’t reach smaller centers. And outside of emergency care, hospitals today typically refuse to perform elective surgeries or infusions on uninsured patients.
Switching to “site-neutral” payments would help contain health care costs for Americans who are overburdened and in need of relief. The Consumer Financial Protection Bureau reports that 20% of U.S. households have medical debt, a problem that disproportionately affects black and Hispanic communities. And an analysis by Peterson and KFF found that 64% of people with medical debt admit to delaying or avoiding care altogether for financial reasons.
The reforms would also save a lot of money: In 2021, the Committee for a Responsible Federal Budget calculated that if Medicare began paying in a site-neutral manner for all services, the program would save $153 billion over the next 10 years, which would go a long way to addressing the impending collapse of the Medicare Trust Fund.
Ironically, this reform Improve Quality of care. In many cases, surgery centers and local infusion centers are often run by small physician teams, meaning they’re less likely to become mired in bureaucracy or filled with committees and administrators focused on unrelated issues. (This is part of the reason for the recent exodus of physicians to non-hospital facilities.)
Given the benefits of facility-neutral payments, it’s not surprising that the reform has bipartisan support: In April, former secretaries of Health and Human Services from both the Obama and Trump administrations stated their strong support for a drug infusion bill currently awaiting consideration in the Senate.
Bipartisan groups in the House and Senate have also signaled an openness to more broad measures, including a bill called the Interstate Electricity Transmission Rationalization Act that would prohibit hospitals from overcharging for services provided in off-campus outpatient facilities, blocked only by the hospital lobby.
Lawmakers who pass location-independent payment reform would send a strong message to hospital administrators: Stop moving patients into hospital-owned space simply to make money. Paying wildly different prices for the same procedure is a self-inflicted wound. Patients shouldn’t have to pay for it.
